Allowing the appeal of the assessee the Tribunal held that ; the endeavor of the departmental officers to tax the transaction in question as capital gains was not supported by the any legal base.First and foremost there was no transfer of capital asset,which is the basis for invoking the provisions of S. 45 of the Act, in the case under consideration.The AO and FAA have tried to build a house without laying down foundation.Without the existence of capital assets they have tried to tax capital gain. They have nowhere mentioned as to which capital asset was transferred by the assessee, during the year under consideration.Secondly,it is also not known as to whom the assets were transferred.As per the balance sheet of the assessee it had sold some vehicles during the year and no other asset was sold.If no asset other than vehicles was sold,then how the capital gain would arise about shares,is beyond our comprehension.In spite of reading the orders of the AO and FAA many a times carefully,we are not clear as to how the acquisition of shares of SOHM by Actis can be used for determining the alleged taxability of the assessee under the head short term capital gains.Both the entitiesi.e.Actis and SOHM are not located in India.They are fifth generation holding companies and any transaction between them cannot be imported to tax alleged capital gains of the assessee.As stated earlier,the assessee had acquired businesses two Indian entities,namely,RCC and VMPL.By linking purchasing of shares of SOHM by Actis with the shares issued by the 6107/M/16.Supermax Personal Care Pvt.Ltd. Assessee to the Singapore entity, the AO and FAA have taxed the alleged capital gains.But, the basic fact of transfer of capital asset/(s)by the assessee to a transferee was never proved. Tribunal also observed that the FAA has mentioned in his order that the assessee had transferred the Interest/(stake)in itself outside India to SSPL.We find that the concept of ‘creating of interest in any assets in any manner’ and transferring’interest/stake’was not part of the word ‘transfer’ for the year under consideration and nor it was applicable to that year. ( /I.T.A./6107/Mum/2016, dt. 01.06.2018)( AY. 2011-12)
Supermax Personal Care Private Limted v. ACIT( 2018) 65 ITR 42 (SN) / 169 DTR 41 / 194 TTJ 815 ( Mum)(Trib) , www.itatonline.org
S. 45: Capital gains- Argument that the allotment of shares by the assessee’s holding co to foreign investors at huge valuation results in a “transfer”/ “indirect transfer” of the assessee’s assets to the foreign investors is not correct. Argument that a multi layered holding structure was deliberately created to avoid taxes in India and to conceal the information about the ultimate beneficiaries is also not correct [ S.2 (47), 48 ]